Reliance Communications is facing pressure from some of the telecom tower companies including Indus Towers, GTL, American Tower Company, Bharti Infratel, etc. to clear pending payments for using their cellular sites.
A report in financial daily Economic Times says the Anil Ambani-promoted Reliance Communications has defaulted its payment to some of telecom tower companies. Reliance Communications is using leased towers for half of its wireless subscribers.
Reliance Communications in a February 2017 presentation said it has an integrated nationwide network with nearly 43,000 towers, nearly 62,000 cell sites, 190,000 Km optical fibre network and 1.1 million sq ft data centre space.
Recently, Reliance Communications said it will call off its merger talks with Maxis-owned Aircel. Maxi is the largest telecom operator in Malaysia. Reliance Communications was in talks with Maxis to merge its mobile business in order to come out of debt conditions.
Reliance Communications, which is going for spectrum trading with Reliance Jio, could start cutting down jobs because of its deteriorating financial conditions. Analysts tracking the telecom sector say Reliance will not be able to come out of the present financial situation due to hyper competition in the market.
The above chart prepared by India Ratings indicates that Reliance Communications have lost 5.72 million subscribers during September 2016 to June 2017 due to competition from Reliance Jio and Airtel.
Reliance Communications’s wireless subscribers will be in deep trouble if some of these tower firms stop serving services to the telecom operator.
Reliance Communications serves nearly 87 million wireless subscribers including 32 million data subscribers of which nearly 23 million are 3G / 4G subscribers.
Tower companies in trouble
Revenues of telecom tower companies will be protected in the short to medium term with tenancy additions from 4G expansions likely to offset tenancy losses emanating from the merger of Vodafone and Idea Cellular and the acquisition of Telenor India Communications by Bharti Airtel.
Tanu Sharma, associate director of India Ratings, earlier said the average rental per tower could remain under pressure in FY 2018 due to deteriorating financial health of the telecom companies, despite contractual escalators embedded in master service agreements.
However, cellular site upgradation and data driven site growth will support the revenue growth. Base Transceiver Station additions are likely to be strong, particularly with operators launching and/or expanding their 3G and 4G service offerings.
“Cash flows of telecom tower companies are also likely to be protected from the exit penalties upon consolidation due to cancellation of duplicate agreements,” Tanu Sharma said.
There are about 420,000 telecom towers in India with an average tenancy ratio of 2x-2.2x which could increase by 15 percent-20 percent over FY18-FY19 with 4G emerging as a predominant data technology.
